Shippers traversing multiple carrier sites to submit SOLAS VGM declarations may be vulnerable to security risks, data errors and unnecessary delays

Many Arrows of Opportunity
Trade Tech recommends shippers to use centralized cloud-based portals, like its Syrinx™ e-Shipping Portal (Syrinx), to submit SOLAS VGM declarations to carriers. Syrinx, which is connected to virtually all carriers, is significantly more efficient than using multiple carrier portals and has the added benefits of increased security and reduced risk of data entry errors. Experience how simple it is here.

 

Since the SOLAS VGM regulation went into effect, many shippers are resorting to carrier portals to submit their VGM declarations. As a result of using this VGM submission method, shippers that work with multiple carriers are required to create multiple logins and manually enter information into multiple carrier websites for each shipment.  In order to check the status of VGM declaration submissions, shippers must login to each carrier website. This time-consuming process continues to reduce productivity as shippers typically use a number of carriers. In addition to the tedious task of entering data into multiple sites, the shipper is more vulnerable to data entry errors as well as their sensitive information being hacked.
Trade Tech co-founder and CEO Bryn Heimbeck says, “It has been shippers’ initial response to use carrier portals to submit their VGM declarations because they’re free. However, there is a real inconvenience of doing business this way. For example, if a shipper does business with 15 carriers, they’re going to suffer from the extensive amount of time and effort it takes to manually enter those declarations for each shipment in 15 different carrier portals. While the carrier portals may not cost money per se, this process costs shippers’ time, which in the end is money. This is why we strongly recommend the use of one centralized, secure cloud-based portal for VGM submissions.”

By using a single, centralized, cloud-based portal that is connected to multiple carriers, such as Syrinx, shippers benefit from the following:

  • One secure login to submit the VGM for all their shipments, regardless of carrier.
  • Ability to check the status of each VGM submission in real-time by only logging into one platform.
  • Increased efficiency and reduced risk of data entry errors by only keying data once.
  • Reduced security risks by having one secure portal and login.
Unique benefits specific to the Trade Tech solution include the system’s robust validation process which, as an example, provides an auto-populate process for trading partner information, ensuring data consistency throughout the supply chain. In addition to VGM submissions, Syrinx has the capability for shippers to submit various security filings, including Automated Manifest System (AMS) filings, Importer Security Filings (ISF), Japan Customs Advance Filing Rules (AFR), Canada Advance Commercial Information (ACI) and Canada eManifest simultaneously, plus Automated Export System (AES) filings. These filings are naturally integrated into a single interface.

Japan, China, U.S. Ports Seen at Highest Catastrophe Risk

Photo: Port of New Orleans.Maersk New OrleansInsurers have studied the high risk from natural disasters occurring at the world’s ports. Similarly they are assessing the higher risk of mis-declared cargo weights on container ships; a potential man-made disaster.

We note that presently

  1. All around the globe, SOLAS VGMs data is being collected incorrectly and non-compliant, if at all.
  2. As the insurance think tanks are doing studies of weight declarations pre-VGM and post-VGM implementation, they will undoubtedly find discrepancies between declared and actual weights.
  3. The Bloomberg article, below,  states that the risk per port is $2 billion, yet the cost of one manmade disaster alone, in Tianjin, exceeded $3 billion and the tragic loss of more than 170 lives.

By Agnel Philip

(Bloomberg) — Ports in Japan, China and the U.S. face the greatest financial risk from natural disasters because of their vulnerable locations and increasing cargo volumes, a risk-management firm said.

Nagoya, Japan, leads all ports with a potential $2.3 billion cost to insurers from a one-in-500-year event because of the threat from earthquakes and windstorms, RMS Inc., a risk-modeling firm, said Monday in a statement. Guangzhou, China, is second at $2 billion, the company said, citing the possibility of wind-related losses and the dangers involving petroleum products and autos. RMS said satellite images and analysis of cargo types and storage methods helped modernize risk assessments.

“Outdated techniques and incomplete data have obscured many high-risk locations,” Chris Folkman, director of product management at RMS, said in the statement. “The industry needs to cease its guessing game when determining catastrophe risk and port accumulations.”

Tianjin Disaster

The report was released a year after the Tianjin port explosion in China, a man-made disaster that led to more than $3 billion in claims after damaging property, disrupting supply chains and killing more than 170 people. RMS’s analysis, which also considers the amount of time cargo stays in port, found that the increased use of standardized shipping containers increased the amount of goods exposed to damage. Ships and ports have grown bigger to accommodate the containers.

Takahiro Ono, risk management supervisor at Nagoya Port Authority, said planning for possible catastrophes is a priority.

‘Safe and Secure’

“We’ve been preparing for emergencies and disaster on a daily basis to ensure a safe and secure port,” he said.

U.S. ports at the Gulf of Mexico held six of the top 10 spots, led by Plaquemines and New Orleans in Louisiana, because of their exposure to hurricanes. The country’s other locations on the list are Pascagoula, Mississippi; Beaumont, Texas; Baton Rouge, Louisiana; and Houston.

Catastrophe costs tied to wildfires in the oil-producing region of Canada and storms in the U.S. cut profits at insurers including Chubb Ltd. and XL Group Ltd. this year. Travelers Cos. said second-quarter net income fell to its lowest since 2012 in part because of the fires.

© 2016 Bloomberg L.P

Could VGM become a catalyst for industry change?

Tipping PointSOLAS VGM data underpins most shipping documents. In a radical view, Trade Tech argues that using cloud software to automate VGM data capture and hand-off, can benefit other logistics processes to the point of becoming transformational. Freight forwarders are transforming into a hybrid of transportation- and IT service providers.

The solution whitepaper “SOLAS VGM – The Tipping Point for Shipping Industry Transformation” outlines how moving to a cloud-based approach will:
• Accelerate supply chain information flows and eliminate information bottlenecks that halt cargo movements.
• Reach all involved parties, globally, with familiar and easy to use interfaces that are instantly available and easily adopted.
• Ensure up to date solutions that are compliant and meet industry requirements.
• Enable shippers to focus on shipment planning, exception monitoring and controlling while the actual shipment execution is completely automated and instrumented – in effect changing the way shippers work.
• Drive standardization of supply chain data across the industry.

VGM: Here to stay?

Insurance CarrierWill the SOLAS VGM requirement ever go away? The short answer is: probably not.

Why ask this question? Many people appear to be calculating their preparedness for VGM on July 1 based on the news coverage of a concerted fight to derail the VGM requirement or the fact that many governments have made no comment on the implementation of the rule. Looking deeply at the underlying pressures to implement the VGM requirement yields a strong conclusion that the VGM is necessary and is not something that the carriers are perpetrating on their own or could move away from if they wished.

Let’s first look at some basic principles in shipping.   Ships float on the water and will have to face a number of powerful elements when they are at sea. Rule #1 in shipping is: know how much weight you are putting on the vessel and where. There is no other rule that comes before this rule.

All of the liner carriers will explain with tone of complete seriousness just how complicated and important calculating the ship’s load plan is. The obvious rejoinder is “Why bother if the information is not known to be accurate?”

Furthermore, the mega ships exacerbate this issue on two counts. First, the mega ships now have more containers above the water line than below the water line in contrast to the smaller vessels currently servicing the major trade lanes. Secondly, the significantly larger volumes of cargo means significantly more unanticipated weight as a result of having so many more containers on board the ship. The IMO reported that based on their research the average container is under declared by 6000 lbs. That would mean 54 million lbs of unreported weight on an 18,000 TEU mega ship or 2700 TEU averaging 20,000 lbs / TEU. That’s like having a small vessel’s worth of undeclared cargo on board. That’s a lot of weight!

So, do we know that the cargo weights given are known to be inaccurate? Clearly, there are many shippers who do weight their cargo accurately and provide accurate information. Many of these shippers have a vested interest in accurately declaring their cargo weight as they sell their goods based on weight and the shipping documents need to match the commercial invoice and be in line with other support documents. However, research conducted by the major insurance providers overwhelmingly evidenced large scale under or mis-declared cargo weights.

This leads us to look more closely at the vessel insurance providers. These are the companies that pay out when there is an accident involving cargo in the custody of the carriers.   The insurance industry is well respected for doing empirical research with the sole goal of mitigating risk. Their conclusion was and is that risk can only be mitigated if substantial additional steps are put in place on a global basis to insure that accurate cargo weights are declared.

The less empirical method for researching the extent of cargo weight mis-declaration is to listen to the level of outcry by the shipping community over the need to now provide a verified and accurate cargo declaration. Simply put, if securing an accurate cargo weight had been part of the standard operating procedure of the majority of shippers, then there would be little or no cry now of how painful securing that accurate assessment will be.

Let’s go back to the insurance companies because these are the real impetus behind the SOLAS VGM requirement. They have worked well with the carriers and the IMO and a number of major governments to put in place this requirement. The carriers have been given an option: either take steps to secure accurate cargo weights or face steeply higher insurance premiums or potentially loose their insurance all together. The carriers would violate their charter hire agreements or commercial lending or bond requirements if they went without insurance. They would also violate their charter hire and financial agreements if they now operate outside of the SOLAS convention that sets all of the ship operations requirements for safe and proper ship management.

In short, the carriers have no option at this point but to follow SOLAS including the VGM. This is not first and foremost a government initiative. It is a commercial initiative that is being more heavily enforced by some governments than others.

The real question should be “is there a way that we can benefit as an industry from the VGM requirement?” This is the question that we will examine more closely in the next blog.

 

 

Trade Tech